New FCC Oversight Cable Industry Eased

Cable television companies dodged an effort by the country's top communications regulator to impose greater control over programming, but the industry is far from escaping increased government oversight.

After fierce lobbying by the industry, the Federal Communications Commission backed away Tuesday night from a finding on cable TV market dominance that was promoted by Chairman Kevin Martin and would have triggered a rule giving the agency significant new powers to ensure program diversity. The finding was part of a larger report the FCC publishes annually on the status of competition on the pay TV market.

While the cable industry beat back the "imminent threat" of new FCC oversight for the time being, Oppenheimer & Co. analyst Thomas Eagan said the industry still faces congressional efforts to impose legislation that would keep phone and cable companies from charging for preferential treatment of Internet traffic.

"I wouldn't say the cable operators are out of the woods from a regulatory risk perspective," Eagan said.

Blair Levin, a Stifel Nicolaus analyst, said the issues affecting cable companies such as Comcast Corp. and Time Warner Cable Inc. _ that includes everything from programming mandates to set-top box regulations _ won't disappear.

"In Washington, battles don't really end, they keep morphing and evolving," he said.

Martin, an outspoken critic of the industry on price and programming, sought greater control over cable operators quite possibly to push through other initiatives, several analysts have said. One is the so-called a la carte model, where subscribers can choose to pay for individual channels rather than bundled packages to subscribers, which the industry has fought.

Adam Thierer, a senior fellow at the think tank Progress & Freedom Foundation, which favors industry deregulation, said Martin is trying to lay the regulatory groundwork to create an environment where a la carte could be mandated.

"I personally believe it can be traced to a desire on his part to expand the reach of the federal government's ability to regulate and potentially censor the content of video programming," he said.

An FCC spokeswoman declined to comment for the story.

In the report on competition in the pay-television industry, Martin wanted his fellow commissioners to approve the finding that said cable TV reached enough U.S. subscribers to activate the so-called 70/70 rule _ whereby 70 percent of U.S. households have access to cable and 70 percent of those households subscribe. Under that rule, contained in a 1984 law, the agency would gain significant new powers.

But with a majority of the five-member commission expressing doubts about the data backing up Martin's report, he was forced to backtrack, convincing his colleagues late Tuesday only to adopt the pay TV competition report, without reaching a conclusion on the 70/70 rule. As part of that decision, all cable operators must now provide subscriber data to the FCC within 60 days.

Analysts said the 70/70 rule could still be invoked if data shows the threshold was reached, but the cable industry said it doubts that will happen.

Craig Moffett, an analyst at Sanford C. Bernstein, said the rule's defeat may have "materially eroded" some of Martin's power base, potentially hindering the FCC on other issues, especially with the cable industry.

"The obvious question now is how much progress will a divided commission be able to make over the next 12 months?" he posed.